sustainability Article Efficiency and Risk in Sustaining China’s Food Production and Security: Evidence from Micro-Level Panel Data Analysis of Japonica Rice Production Chengjun Wang 1,2,*, Zhaoyong Zhang 3,* and Ximin Fei 2 1 Faculty of Economics and Management, Zhejiang A&F University, Lin’an, Zhejiang 311300, China 2 Faculty of Management, Zhejiang University, Hangzhou, Zhejiang 310082, China; [email protected] 3 School of Business & Law, Edith Cowan University, Joondalup WA6027, Australia; [email protected] * Correspondence: [email protected] (C.W.); [email protected] (Z.Z.) Received: 2 April 2018; Accepted: 18 April 2018; Published: 21 April 2018 Abstract: Sustainable food production and food security are always challenging issues in China. This paper constructs a multi-element two-level constant-elasticity-of-substitution (CES) model to assess technological progress in, and its contribution to, japonica rice production in China. The results show that the speed of technological progress in the production of japonica rice on average was 0.44% per annum in 1985–2013, and technological progress has contributed significantly to the growth of japonica rice production in China. Robustness checks show that the results appear to be sensitive to which sub-sample is used. Labour and some other inputs are found to be significant but negative, especially during the middle sampling period of 1994–2006 and in eastern and western regions. This has important policy implications on the impact of rural-to-urban migration and farmers’ human development. Keywords: China’s food policy; sustainable food security system; japonica rice production; two-level CES function; technological progress 1. Introduction In recent decades rapid population growth and urbanization have made food security one of the most important global issues. According to Alexandratos and Bruinsma [1] and the United Nations (UN) [2], the world population is predicted to grow from 6.9 billion in 2010 to 8.6 billion in 2030, 9.8 billion in 2050 and 11.2 billion in 2100, while food demand is predicted to increase by 50% by 2030 and 70% by 2050. The main challenge facing the agricultural sector is how to sustain the global food production system to ensure food security and meet the projected increase in food demand, given rising resource constraints for agricultural production, yields slowing down and climate change (see Popp et al. [3,4]). Ultimately, global food production capacity will be constrained by the amount of farmland and water resources available and suitable for crop production and by biophysical limits on crop growth (Van Ittersuma et al. [5]). For instance, Popp et al. [4] maintain that there are growing opportunities and demands for the use of biomass to provide additional renewables, energy for heat, power and fuel, pharmaceuticals and green chemical feedstock. Burchi and De Muro [6] propose a capability-based analysis of food security by highlighting the importance of factors such as participation in household decision making and empowerment, and distinguishing between the capability to be food secure and functioning of food security. Studies have shown that average farm yields have reached 75–90% of the yield potential ceiling (Cassman et al. [7]; Grassini et al. [8]), and it becomes very difficult to further raise yields and have significant breakthroughs in the Sustainability 2018, 10, 1282; doi:10.3390/su10041282 www.mdpi.com/journal/sustainability Sustainability 2018, 10, 1282 2 of 14 genetic improvement of photosynthesis or drought tolerance (Fischer and Edmeades [9]; Hall and Richards [10]). In China, sustainable food production and food security have always been listed as a top policy priority. It is widely believed that food security is related to national stability, independence and social stability. Hence, achieving food security and safety and maintaining the stability of domestic food production have been the major focus of Chinese agricultural policy (See Peng et al. [11]; Gautam and Yu [12]). Feeding one fifth of the world’s population with rising incomes from less than a tenth of its arable land and freshwater is posing significant challenges to Chinese policy makers, while China’s domestic food production and food security status will have large effects on the global food stability and security. This issue becomes even more prominent when considering recent rapid urbanization and industrialization, decline in arable farmland, a rapidly ageing urban population and other resource constraints in China. Several studies have shown that rice and maize yields appear to have plateaued or become stagnant in China and other major grain production areas (Brisson et al. [13]); Cassman et al. [7]); Van Wart et al. [14]), and farmland in China declined by about 11% between 1978 and 2006 (Fleming [15]). Some suggest that China should import more land-intensive food to reduce pressure on its already strained land and water resources, and others express fear over the fact that China’s long-term dependency on foreign exports will fuel food-price increase and worsen the food insecurity status in many resource-poor countries (Wang et al. [16]; Liang et al. [17]; Ghose [18]). All these factors cast doubt on the possibility of continuing to rely on the traditional way of farming, such as increasing inputs of labour and expanding cultivated land and irrigation. Many advocate the need for “sustainable intensification” of agricultural production focusing on increasing production efficiency while minimizing economic and environmental costs (Godfray et al. [19]; Garnett et al. [20]). Thus, it has become increasingly important to link agricultural production efficiency and productivity with the sustainability of agriculture and the food security system, especially in the case of China. Rice is one of the most important food staples in China, accounting for about 20% of the total crop area harvested (Chen et al. [21]) and about 65% of total staples consumption (Peng et al. [11]). Rice can be categorized into two main types, indica and japonica. With the rapid rise in incomes and private wealth as well as a higher standard of living in China, rice consumers have become increasingly concerned about the quality of the rice they consume. As compared to indica and other rice varieties, japonica rice is mostly preferred and considered as premium quality rice in China, and demand for japonica rice has been rising rapidly in recent years. However, continuous expansion of japonica rice production has been constrained by declining arable land, labor and capital as well as other natural resources, and it will increasingly become difficult to continue relying on resource inputs to expand production. This implies that, in order for China to maintain its sustainable farming system and ensure the stability and security of the food supply, technological progress will be the major driving force for increasing agricultural productivity and promoting agriculture development. It is therefore essential to ask the question of to what extent China’s japonica rice production growth is due to technical efficiency and technological progress. According to the European Union (EU) [22], total factor productivity (TFP) is the main indicator to measure changes in productivity and TFP growth is defined as the ratio between the change in production volumes over a considered period and the corresponding change in inputs (or factors) used to produce them, and hence measures the growth in productivity over a given time span. An increase in TFP reflects a gain in output quantity which is not originating from an increase in input use. The purpose of this paper is to adopt an improved multi-element two-level constant-elasticity-of-substitution (CES) production function to measure the technical efficiency and technological progress and its contribution to japonica rice production using cross-provincial panel data from China from 1985 to 2013. In particular, we intend to assess the rate of scientific and technological progress and to measure its contribution rate in japonica rice production in China by using panel data at provincial level. We will also shed light on the impact of the relevant agricultural policies on technological progress and contribution rate across the regions, and draw Sustainability 2018, 10, 1282 3 of 14 policy implications for how to sustain japonica rice production in China. This paper is among the first to assess the contribution of science and technological advances to japonica rice production in China using an improved multi-factor two-level CES production function and provincial panel data across China. This study has important implications for China’s long-term agricultural policy and development strategy. The rest of the paper is structured as follows: Section2 provides a brief literature review. Section3 discusses the analytical framework and data sets employed in this study. In Section4 we analyze the estimation results. Finally, Section5 concludes. 2. Literature Review Numerous studies empirically examine the effects of science and technological progress on agricultural production, and many advocate that the sustainable intensification of agricultural production focusing on technological progress and increasing production efficiency is the key to ensuring the sustainability of agriculture and food security (Tilman [23]; Godfray et al. [19]; Garnett et al. [20]; EU [20]). Shankar and Thirtle [24] estimate a damage-control specification and a conventional Cobb–Douglas production